JSE Relative Sector Ratings: Here's What's Leading/Lagging

Research Notes For 09 to 13 June > https://www.unum.capital/post/r0913june

Trade Local & Global Financial Markets with Unum Capital.

To get started, email tradingdesk@unum.co.za

Here's an analysis of the JSE sectors considering the weighting of the timeframes (Short > Medium > Long):

Key:

• Strong: Indicates outperformance relative to the Top 40.

• Neutral: Indicates performance in line with the Top 40.

• Weak: Indicates underperformance relative to the Top 40.

• Overbought: Suggests the sector might be due for a pullback.

• Oversold: Suggests the sector might be due for a bounce.

• High Bullish Momentum: Strong upward price movement.

• High Bearish Momentum: Strong downward price movement.

Sector Analysis:

1. Technology vs Top 40

• Short Term: Neutral

• Medium Term: Strong

• Long Term: High Bullish Momentum / Approaching Overbought

• Analysis:

  • Strength/Weakness: The sector shows significant strength in the Long Term (High Bullish Momentum / Approaching Overbought) and Medium Term (Strong), but a more subdued, in-line performance in the Short Term (Neutral).

  • Improvement/Deterioration: There's a notable deceleration in momentum from the Long Term to the Short Term, moving from a highly positive outlook to a neutral one. This suggests a potential easing of the strong upward trend in the nearer term.

2. Miners vs Top 40

• Short Term: Neutral

• Medium Term: Weak

• Long Term: High Bearish Momentum / Approaching Oversold

• Analysis:

  • Strength/Weakness: This sector exhibits considerable weakness, especially in the Long Term (High Bearish Momentum / Approaching Oversold) and Medium Term (Weak). The Short Term is Neutral, indicating a pause in the decline but not a reversal.

  • Improvement/Deterioration: While the Short Term is neutral, the underlying weakness from the Long and Medium Term persists, indicating a challenging environment for this sector. No significant improvement is observed.

3. Banks vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: Neutral

• Analysis:

  • Strength/Weakness: Consistently neutral across all timeframes, indicating performance generally in line with the Top 40.

  • Improvement/Deterioration: No significant changes or trends are apparent, maintaining a steady, in-line performance.

4. Insurers vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: Neutral

• Analysis:

  • Strength/Weakness: Similar to Banks, Insurers are consistently neutral across all timeframes.

  • Improvement/Deterioration: No notable changes or trends.

5. Gold Miners vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: Strong

• Analysis:

  • Strength/Weakness: The sector shows strength in the Long Term (Strong), but this does not translate into the Medium or Short Term, which are Neutral.

  • Improvement/Deterioration: The Long Term strength appears to be moderating as we move towards the shorter timeframes, suggesting a consolidation or pause in the strong performance.

6. Platinum Miners vs Top 40

• Short Term: Strong

• Medium Term: Strong

• Long Term: Neutral

• Analysis:

  • Strength/Weakness: This sector displays significant strength in the Short and Medium Term (Strong), which is a positive development from a Neutral Long Term outlook.

  • Improvement/Deterioration: A clear improvement is evident from a neutral Long Term to strong performance in the Medium and Short Terms, indicating increasing relative outperformance.

7. Consumer Staples vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: Neutral

• Analysis:

  • Strength/Weakness: Consistently neutral across all timeframes.

  • Improvement/Deterioration: No significant changes or trends.

8. Consumer Disc. vs Top 40

• Short Term: Strong

• Medium Term: Neutral

• Long Term: Neutral

• Analysis:

  • Strength/Weakness: Shows strength in the Short Term (Strong) after being neutral in the Medium and Long Terms.

  • Improvement/Deterioration: A positive shift is observed in the Short Term, indicating an improvement in relative performance.

9. Healthcare vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: Weak

• Analysis:

  • Strength/Weakness: While neutral in the Short and Medium Terms, the underlying weakness in the Long Term (Weak) suggests a challenging fundamental backdrop.

  • Improvement/Deterioration: No significant improvement from the Long Term weakness, though a neutral performance in the shorter terms indicates a stabilization rather than a reversal.

10. Hospitals vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: Weak

• Analysis:

  • Strength/Weakness: Similar to Healthcare, exhibiting Long Term weakness (Weak) but neutral performance in the Medium and Short Terms.

  • Improvement/Deterioration: No clear improvement from the Long Term weakness.

11. Coal Miners vs Top 40

• Short Term: Weak

• Medium Term: High Bearish Momentum / Approaching Oversold

• Long Term: High Bearish Momentum / Approaching Oversold

• Analysis:

  • Strength/Weakness: This sector is experiencing significant weakness across all timeframes, particularly in the Long and Medium Terms (High Bearish Momentum / Approaching Oversold). The Short Term is also Weak.

  • Improvement/Deterioration: No improvement is evident; rather, a sustained period of underperformance and strong downward momentum.

12. Telecoms vs Top 40

• Short Term: Neutral

• Medium Term: Strong

• Long Term: Strong

• Analysis:

  • Strength/Weakness: Exhibits strength in the Long and Medium Terms (Strong), but this tapers off to Neutral in the Short Term.

  • Improvement/Deterioration: The strong performance in the longer timeframes is moderating in the Short Term, suggesting a potential pause or consolidation.

13. Paper & Pulp vs Top 40

• Short Term: Weak

• Medium Term: Weak

• Long Term: High Bearish Momentum / Approaching Oversold

• Analysis:

  • Strength/Weakness: This sector is consistently weak across all timeframes, with the Long Term indicating strong downward momentum (High Bearish Momentum / Approaching Oversold).

  • Improvement/Deterioration: No improvement; rather, a sustained period of underperformance.

14. Chemicals vs Top 40

• Short Term: Weak

• Medium Term: Neutral

• Long Term: High Bearish Momentum / Approaching Oversold

• Analysis:

  • Strength/Weakness: Shows significant Long Term weakness (High Bearish Momentum / Approaching Oversold) and Short Term weakness (Weak), though the Medium Term is neutral.

  • Improvement/Deterioration: While the Medium Term is neutral, the overall trend is one of weakness, with a noticeable deterioration from the Medium to the Short Term.

15. Luxury Goods vs Top 40

• Short Term: High Bearish Momentum / Approaching Oversold

• Medium Term: Weak

• Long Term: Neutral

• Analysis:

  • Strength/Weakness: This sector is facing significant Short Term weakness (High Bearish Momentum / Approaching Oversold) and Medium Term weakness (Weak), despite a neutral Long Term outlook.

  • Improvement/Deterioration: A clear deterioration is observed from a neutral Long Term to weak and then significantly bearish in the Short Term, indicating a sharp decline in relative performance.

Summary Ranking of Sectors by Preference (Highest to Lowest):

This ranking prioritizes the Short Term, then Medium Term, then Long Term, and uses the defined hierarchy of strength.

1. Platinum Miners vs Top 40: (Short: Strong, Medium: Strong, Long: Neutral) - Strongest short-term outlook.

2. Consumer Disc. vs Top 40: (Short: Strong, Medium: Neutral, Long: Neutral) - Good short-term strength.

3. Technology vs Top 40: (Short: Neutral, Medium: Strong, Long: High Bullish Momentum / Approaching Overbought) - Strong underlying momentum, though short-term is neutral.

4. Telecoms vs Top 40: (Short: Neutral, Medium: Strong, Long: Strong) - Consistent strength in longer timeframes, neutral in short term.

5. Banks vs Top 40: (Short: Neutral, Medium: Neutral, Long: Neutral) - Consistent in-line performance.

6. Insurers vs Top 40: (Short: Neutral, Medium: Neutral, Long: Neutral) - Consistent in-line performance.

7. Consumer Staples vs Top 40: (Short: Neutral, Medium: Neutral, Long: Neutral) - Consistent in-line performance.

8. Gold Miners vs Top 40: (Short: Neutral, Medium: Neutral, Long: Strong) - Long-term strength not translating to short-term.

9. Healthcare vs Top 40: (Short: Neutral, Medium: Neutral, Long: Weak) - Underlying long-term weakness.

10. Hospitals vs Top 40: (Short: Neutral, Medium: Neutral, Long: Weak) - Underlying long-term weakness.

11. Miners vs Top 40: (Short: Neutral, Medium: Weak, Long: High Bearish Momentum / Oversold) - Significant weakness in longer timeframes.

12. Chemicals vs Top 40: (Short: Weak, Medium: Neutral, Long: High Bearish Momentum / Oversold) - Short-term weakness and long-term bearishness.

13. Paper & Pulp vs Top 40: (Short: Weak, Medium: Weak, Long: High Bearish Momentum / Oversold) - Consistent weakness.

14. Coal Miners vs Top 40: (Short: Weak, Medium: High Bearish Momentum / Oversold, Long: High Bearish Momentum / Oversold) - Severe and consistent weakness.

15. Luxury Goods vs Top 40: (Short: High Bearish Momentum / Oversold, Medium: Weak, Long: Neutral) - Most significant short-term deterioration and bearishness.

Lester Davids

Senior Investment Analyst: Unum Capital